UK Autumn Budget 2025: What Businesses and Taxpayers Need to Know
UK FINANCENEWS
Chancellor Rachel Reeves delivered the UK’s Autumn Budget 2025 against a backdrop of weak economic growth, high inflation, and ongoing pressure on public finances. For businesses, households, and advisers, this year’s budget signals a firm shift toward revenue-raising through structural changes rather than headline tax rate increases. Many of the measures rely on threshold freezes, narrowing reliefs, and focusing on wealth and property to close the fiscal gap.
Below is a practical breakdown of the key changes and their implications, particularly from an accounting and compliance perspective.
1. Tax Threshold Freezes Extended to 2031
One of the most consequential decisions in the budget is the extension of the freeze on income tax and National Insurance thresholds for an additional three years beyond 2028. These freezes have already contributed to the highest tax burden in 70 years, and extending them until 2031 will intensify “fiscal drag”.
What this means:
As wages rise with inflation, more people will be pushed into higher tax bands.
By 2029–30, nearly 780,000 more individuals will pay income tax for the first time.
920,000 more people will move into the higher-rate band, and 4,000 into the additional rate.
For businesses, this will influence payroll planning, salary negotiations, and employee tax projections. For individuals, the effective tax burden will increase even though nominal tax rates remain unchanged.
2. Increased Taxation on Wealth, Property & Investment Income
Reeves avoided raising core tax rates on income tax, NI, or VAT. Instead, the budget raises revenue through targeted measures affecting wealth and investment returns.
Dividend, Savings & Property Income
Dividend tax rates will rise by 2 percentage points from April 2026.
Tax on savings income will also increase by 2 points from April 2027.
From 2027, property income will be taxed under a separate structure, with rates set at:
22% basic
42% higher
47% additional
Finance cost relief will align with the new 22% property basic rate.
These changes significantly affect landlords, investors, and portfolio-driven taxpayers, making proactive tax planning essential.
Mansion Tax Equivalent
Properties in England valued above £2m will face a council tax surcharge between £2,500 and £7,500 annually from April 2028. This measure is expected to broaden over time and gradually affect more property owners.
ISA Rule Changes
From April 2027, cash ISAs for under-65s will be capped at £12,000 of the £20,000 annual allowance, with the remainder reserved for investments. This encourages risk-based investing over cash savings.
3. Salary-Sacrifice Pension Contributions Tightened
One of the more important structural changes affects salary-sacrifice schemes. From April 2029, only the first £2,000 of salary-sacrificed pension contributions will remain exempt from National Insurance. Anything above this will attract both employee and employer NICs.
Implications for employers:
Higher payroll tax costs for companies using pension salary-exchange models.
Need to reassess employee benefit packages.
Implications for employees:
Reduced tax efficiency of high pension contributions through salary sacrifice.
This measure alone is expected to raise £4.7bn by 2029–30.
4. Electric Vehicle Mileage Tax Introduced
A significant shift comes in the form of a new mileage-based tax for electric vehicles (EVs), signalling the end of the “tax-free EV era.”
From 2028:
EVs will be charged 3p per mile
Plug-in hybrids will be charged 1.5p per mile
Rates will rise with inflation
This replaces lost fuel duty revenue and will impact businesses with electric fleets and individuals benefiting from low running costs.
5. Major Welfare Expansion: Two-Child Benefit Cap Scrapped
The two-child benefit limit will be removed from April 2026. This is projected to lift 450,000 children out of poverty and will increase annual welfare spending by an estimated £2.3bn.
Other welfare changes include:
State pension rising 4.8% under the triple lock
Help to Save scheme made permanent
Free training for apprentices under 25 in SMEs
Stronger enforcement against fraud and non-compliance
This signals a wider government move away from austerity-style budgeting.
6. Business-Focused Measures
Frozen Employer NIC Thresholds
Employer National Insurance thresholds will remain frozen until 2031, meaning employer NIC costs will rise as wages increase.
Import & Online Retail Changes
The tax exemption for low-value imports (under £135) will be abolished from March 2029.
This supports UK retailers who say the current arrangement distorts competition in favour of overseas sellers.
Gambling & Entertainment
Remote gaming duty will rise from 21% to 40%.
Online sports betting duty rises from 15% to 25%.
Bingo duty abolished.
Capital Gains – Employee Ownership Trusts
CGT relief on business sales to employee ownership trusts (EOTs) will drop from 100% to 50%. This affects exit planning for business owners.
7. Household & Cost-of-Living Measures
To ease pressure on households:
Rail fares in England frozen for 2026
Fuel duty freeze and temporary 5p cut retained until late 2026
Green levies removed from energy bills, saving an estimated £88 per household
Alcohol, vaping, and tobacco duties will rise with inflation
These measures aim to stabilise short-term living costs without significantly boosting inflation.
8. Economic Outlook and Market Reaction
The OBR’s updated forecast:
Growth upgraded to 1.5% for 2025
But downgraded to 1.4–1.5% annually from 2026–29
Inflation is expected to fall to the 2% target by 2027.
Financial markets responded calmly:
Sterling initially rose 0.3% before stabilising
FTSE 100 and FTSE 250 gained around 0.6%
This suggests the budget was perceived as steady rather than disruptive.
Conclusion
The Autumn Budget 2025 takes a cautious but revenue-heavy approach, relying on frozen thresholds, wealth-based taxation, reduced reliefs, and structured changes like EV taxation and pensions reform. For individuals and businesses, the burden will increase gradually over the coming years, making proactive tax planning more important than ever.
Boobooks Accounting can help clients navigate these changes, optimise tax positions, and prepare for the long-term effects of rising thresholds and reduced reliefs. Let me know if you’d like a shorter version, a LinkedIn post, or a client-facing email summary.